Evolution of budgetary accounting theory and practice in municipal accounting from 1870

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James H. Potts
ASSOCIATE PROFESSOR OF ACCOUNTING AND FINANCE THE UNIVERSITY OF WEST FLORIDA
THE EVOLUTION OF BUDGETARY ACCOUNTING THEORY AND PRACTICE IN MUNICIPAL ACCOUNTING FROM 1870
Introduction
A distinctive characteristic of governmental accounting is the re-quirement to demonstrate compliance with legal restrictions con-cerning control of revenues and expenditures. In fact, control or budgetary accounts must be integrated into a governmental unit's system of accounts. The National Committee on Governmental Ac-counting considers the budget and its accompanying control fea-tures of such significance that its third principle states:
"An annual budget should be adopted by every governmen-tal unit whether required by law or not, and the accounting system should provide budgetary control over general gov-ernment revenues and expenditures."1
The practices of opening budgetary accounts at the beginning of each fiscal year and of closing these accounts at the end of each fiscal year and the integration of the budgetary accounts with the proprietary accounts during the year are almost universally accepted in modern governmental accounting.
This paper briefly discusses the highlights of the evolution of budgetary accounting from approximately 1870. No attempt was made to deal with the evolution of budgetary accounting prior to this period.
Emphasis on the Need for Budgetary Accounts
The first published work describing the double-entry bookkeeping system and providing insight into the reasoning process supporting the accounting records was published in 1494 by Luca Pacioli in Venice. Around 1870 Michele Riva and Guiseppe Cerboni devel-oped a method which incorporated the budgetary accounts in the accounting system. Interestingly, the credit for the development of